Legislature(2017 - 2018)

2017-01-20 Senate Journal

Full Journal pdf

2017-01-20                     Senate Journal                      Page 0054
SB 30                                                                                                                         
SENATE BILL NO. 30 BY THE SENATE RULES COMMITTEE                                                                                
BY REQUEST OF THE GOVERNOR, entitled:                                                                                           
          "An Act approving and ratifying the sale of royalty oil by                                                           
         the State of Alaska to Petro Star Inc.; and providing for an                                                          
      effective date."                                                                                                          
was read the first time and referred to the Resources and Finance                                                               
The following fiscal information was published today:                                                                           
Fiscal Note No. 1, Department of Natural Resources                                                                              
Governor's transmittal letter dated January 19:                                                                                 
Dear President Kelly:                                                                                                           
Under the authority of Article III, Section 18, of the Alaska                                                                   
Constitution, I am transmitting a bill relating to approval and                                                                 
ratification of the sale of royalty oil by the State of Alaska to Petro                                                         
Star Inc.                                                                                                                       
The Commissioner of Natural Resources has determined that it is in                                                              
the best interest of the State to take royalty oil in-kind from lessees on                                                      
the North Slope. Under two proposed contracts, the Department of                                                                
Natural Resources (Department) will sell North Slope royalty oil to                                                             
Petro Star Inc. for a combined period of five years. The first contract                                                         
does not require legislative approval as an agreement lasting one year                                                          
or less and entered into with the objective to relieve market conditions                                                        
under AS 38.06.055(b). The Department proposes to deliver between                                                               
18,800 to 23,500 barrels per day (bpd) under the first contract. The                                                            
Department estimates that the one-year contract will begin delivery of                                                          
royalty oil on January 1, 2017, and continue until December 31, 2017.                                                           

2017-01-20                     Senate Journal                      Page 0055
The second contract, which requires legislative approval, will have a                                                           
term of four years, beginning on January 1, 2018, and ending on                                                                 
December 31, 2021. The bill would approve and ratify the "Agreement                                                             
for the Sale of Royalty Oil Between and Among the State of Alaska,                                                              
and Petro Star Inc. and Arctic Slope Regional Corporation." The                                                                 
agreement provides for the sale of 16,400 to 20,500 bpd of the royalty                                                          
oil in the first year; from 13,200 to 16,500 bpd in the second year;                                                            
from 10,800 to 13,500 bpd in the third year; and from 8,400 to 10,500                                                           
bpd in the fourth year. The royalty oil would be sold to Petro Star Inc.                                                        
at a price in the agreement calculated to equal or exceed the value that                                                        
the State would obtain for the royalty oil if it was taken in-value. The                                                        
agreement includes provisions to support employment of state                                                                    
residents and in-state processing. Arctic Slope Regional Corporation                                                            
guarantees the performance of Petro Star Inc., its wholly-owned                                                                 
subsidiary, for all of Petro Star Inc.'s obligations under the contract.                                                        
The bill is the culmination of diligent analysis and public process that                                                        
are imperative for responsible resource stewardship. The Department                                                             
and the Alaska Royalty Oil and Gas Development Advisory Board                                                                   
(Board) considered the fiscal, economic, societal, and environmental                                                            
impacts and benefits of the agreement. The Department issued a Final                                                            
Best Interest Finding and Determination on the agreement that                                                                   
included analysis of the factors for the sale of royalty oil in                                                                 
AS 38.05.183. The Department did not receive any comments from                                                                  
the public on the sale during the public comment period that ended on                                                           
August 29, 2016. Additionally, the Board held a public hearing on the                                                           
sale. In accordance with AS 38.06.050, the Board voted to approve a                                                             
written recommendation and report on August 31, 2016,                                                                           
recommending legislative approval of the agreement.                                                                             
The bill would allow the State to obtain the maximum value for its                                                              
royalty oil. I urge your prompt and favorable action on this measure.                                                           
Bill Walker